Anti-Money Laundering

South Africa was recently put on the Financial Action Task Force’s grey-list. The Financial Action Task Force (FATF) – an authoritative quasi-regulatory global body - relegates countries to ‘grey-list’ status when they fail to live up to global anti-money laundering, anti-terrorism, and anti-proliferation financing standards. Following an evaluation and extensive engagements with the African country, the FATF decided that a series of 8 strategic deficiencies needed to be addressed by South Africa before the end of 2025. It therefore placed South Africa under ‘increased monitoring’, a listing informally known as grey-listing. The FATF was created in 1989 to oversee the development and implementation of global anti-money laundering law. Through a series of developments – including the September 11, 2001 terrorism strikes in the United States – the FAFT’s mandate expanded to capture terrorist finance and proliferation financing. Drawn from the content of a series of international instruments attentive to the relationship between money and crime, the FATF compiled a set of 40 recommendations known as the global anti-money laundering, anti-terrorist finance, and anti-proliferation financing standards. The recommendations comprise matters such as specific money-laundering offences and confiscation regimes as well as measures designed to promote financial transparency (for instance, financial reporting requirements and beneficial ownership registries) and to facilitate international cooperation.

This essay argues that a correlation exists between Africa’s colonial history and its money laundering occurrences. Yet the global standards adopted to combat this crime do not consider the country’s peculiarities, a catalyst for unintended consequences. This argument is presented in three parts. The first part centers its discussion on the impact of Nigeria’s colonial history on money laundering and the regulation thereof. The second part focuses on the compliance trajectory of Nigeria and argues that the absence of a truly global framework hinders proactive compliance. The final part postulates that Nigeria has differing options to sustain a robust fight against ML/TF and concludes that a suitable outcome warrants the alignment of internal realities with the global standards.

September 15, 2021

The Global South Dialogue on Economic Crimes (GSDEC) is pleased to announce its Call for Paper on Anti-Money Laundering and Counter-Terrorist Financing (AML/CFT) standards, transplantation errors and unintended consequences.

Adopting an electronic version of the euro and granting it the legal tender status would certainly allow States to adopt more stringent policies for fighting AML and tax evasion. Even though most of the references and examples in this contribution were focusing on the EU context, similar conclusions can be drawn for other parts of the world. While new technologies such as a CBDC could represent an additional tool at disposal of tax authorities to fight tax evasion and fraud, issues concerning the digital divide and privacy shall be addressed while the debate over the design of a CBDC is still ongoing.

The developmental indices of certain countries are immaterial to their compliance levels. Nevertheless, this paper argues that economic development cannot be divorced from economic crime, and for this reason, it is paramount for the SDGs to give this the attention it deserves.

The introduction of CBDCs would, no doubt, raise some legal and regulatory questions. First of all, due to the monetary policy implications of private currencies such as Libra, African countries need to think ahead whether they would want to ban the use of Libra for domestic transactions. Secondly, should African countries introduce their own CBDCs, governments would need to be able to know and manage the identities of parties transacting with these currencies in order to be able to fulfil ‘Anti-money laundering and combating the financing terrorism’ (AML/CFT) requirements. Of course, if these currencies become acceptable globally, they would be required to adhere to, the Financial Action Task Force’s (FATF) - the global watch dog against money laundering and terrorism financing - recommendations on travel rules.

For the objective of AfCFTA not to be defeated through the menace of trade-based laundering of illicit funds, African member states must be proactive to ensure that all necessary measures and regulations are put in place in combating TBML that may ensue therefrom before AfCFTA comes into full implementation.